TY - JOUR
AU - Hudomiet,Péter
AU - Willis,Robert J.
TI - Estimating Second Order Probability Beliefs from Subjective Survival Data
JF - National Bureau of Economic Research Working Paper Series
VL - No. 18258
PY - 2012
Y2 - July 2012
DO - 10.3386/w18258
UR - http://www.nber.org/papers/w18258
L1 - http://www.nber.org/papers/w18258.pdf
N1 - Author contact info:
Peter Hudomiet
University of Michigan Department of Economics
503 Thompson Street
Ann Arbor, MI 48109
E-Mail: hudomiet@umich.edu
Robert J. Willis
3254 ISR
University of Michigan
P. O. Box 1248
426 Thompson Street
Ann Arbor, MI 48106
Tel: 734/936-0314
E-Mail: rjwillis@isr.umich.edu
AB - Based on subjective survival probability questions in the Health and Retirement Study (HRS), we use an econometric model to estimate the determinants of individual-level uncertainty about personal longevity. This model is built around the Modal Response Hypothesis (MRH), a mathematical expression of the idea that survey responses of 0, 50 or 100 percent to probability questions indicate a high level of uncertainty about the relevant probability. We show that subjective survival expectations in 2002 line up very well with realized mortality of the HRS respondents between 2002 and 2010. We show that the MRH model performs better than typically used models in the literature of subjective probabilities. Our model gives more accurate estimates of low probability events and it is able to predict the unusually high fraction of focal 0, 50 and 100 answers observed in many datasets on subjective probabilities. We show that subjects place too much weight on parents' age at death when forming expectations about their own longevity, while other covariates such as demographics, cognition, personality, subjective health and health behavior are underweighted. We also find that less educated people, smokers and women have less certain beliefs; and recent health shocks increase uncertainty about survival, too.
ER -